With tax time right around the corner, here is some great info to help with tough tax questions from our friends at USAA. JJ has been on our show before and he is awesome when it comes to helping us navigate our financial world, this info just might be helpful for you or someone in your extended family and/or friends. We have a new feature on our blog that allows you to share with your Facebook friends or Twitter followers, look for it in the upper right hand side of this post!
5 tax tips for tough tax situations
As the April 15th deadline looms, tax time becomes crazier and crazier. And that’s in the best of circumstances. If you add in a few of life’s curveballs, you could have a downright disaster. So, your returns may be relatively uncomplicated, but new circumstances can make tax preparation a bit trickier.
This year, says USAA’s J.J. Montanaro, a Certified Financial Planner practitioner, you may want to consider engaging the help of a tax professional to make sure you are taking advantage of the tax incentives. However, whether you tackle your taxes yourself or turn to a tax pro, follow these tips to avoid mistakes.
1. You Got Divorced
Notwithstanding reality, when it comes to your filing status it’s black and white. Even if the final date on your divorce is Dec. 31, the IRS views you as divorced for the entire year – so don’t choose married filing jointly status on your return.
If you have children, your divorce decree should state who can claim them as dependents. If that wasn’t decided, you and your former spouse can arrange to alternate years using IRS Form 8332. Visit IRS.gov for more information.
2. Your Spouse Dies
You can file as married filing jointly for the tax year your spouse died (unless you remarried by the end of the year). Additionally, you may also be eligible to file as a qualifying widow(er) with dependent child for 2 years following the year your spouse died.
Keep in mind that life insurance payouts are generally free from federal income tax. But if you invested the money and earned interest, the interest still needs to be reported.
3. Your Dependents Go Solo
You can still claim an exemption for your children if you pay at least half their expenses, they are full-time students, they are younger than 24 at the end of the year, and meet other IRS requirements. Make sure they don’t file returns claiming themselves as dependents, which is viewed as “double dipping” by the IRS.
4. You Have W-2s From Employers In Multiple States
This can be a problem if you must file a state return for one or more states. State laws and filing requirements vary, so check with the state in which you had earned income for specific requirements. Remember, bad news doesn’t get better with time. Keep in mind that relocating for employment reasons can make moving expenses deductible.
5. Your W-2 Is Wrong
Contact your employer immediately if your name, Social Security number, street address, or pay amount contains errors. The employer should then file a Form W-2c with the proper details.
USAA or its affiliates do not provide tax advice. The tax information contained in the material is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding paying taxes or tax penalties that may be imposed on the taxpayer. Taxpayers should seek the advice based on their own particular circumstances from an independent tax advisor.
USAA means United Services Automobile Association and its affiliates.